The 2012 Budget & the Indian Car Scene : All you need to know

This is a discussion on The 2012 Budget & the Indian Car Scene : All you need to know within The Indian Car Scene, part of the BHP India category; Originally Posted by GTO
- Personal vehicles actually account for a minority consumption of diesel fuel in India.
Do you ...

I cannot wait for the hell to be taxed out of diesel vehicles or the taxations to be substantially reduced on petrol. I see no reason for diesel to be subsidized for passenger car owners or cab operators. Every car owner/operator should be taxed the same.

I don't give a damn that mahindra, tata and others are invested in selling diesel cars or that car sales would drop if diesel price went up. If car companies cannot earn profits and stay in business without the subsidies provided by the Indian taxpayer, let them go bankrupt.

It is a national disgrace that diesel pricing strategy created for agriculture and railways is being used by rich people with the money to buy cars, at a huge cost to the national treasury, especially at a time of huge national deficits. Not to mention that diesel vehicles are producing huge particulate emissions compared to petrols because of the weakness of Bharat Standards on that front and thus causing soot and smog in India that has reversed the clean air that had been created by the removal of two strokes and the induction of CNG public transport.

I eagerly await the day when diesel cars will be taxed so high as to completely negate the savings made on the diesel fuel.

I could never understand the link between engine size and exhaust duty. Hypothetically I can make a 1.4 liter gas guzzler, and pay less duty than a 1.6 liter engine with 50% better fuel economy.
It just shows the IQ of the people actually making this budget. The world has moved on, sadly, this country cannot get its head around the fact that with no public transport infrastructure in place, a car is no longer a luxury, its a necessity!

I think that the money generated by taxing cars should be used to build better public transport or roads in the cities. Unfortunately that does not happen leading to congestion and people preferring to buy more personal vehicles like two wheelers in addition to cars.

I eagerly await the day when diesel cars will be taxed so high as to completely negate the savings made on the diesel fuel.

Now there are only few things left where a common man may save money because of Govt Policies and you want to take this also away ? If you see the monthly sales of High end Car/SUV Diesel sales , these will be negligible when compared to Hatch-Back / Small Sedan sales .

On the other point of hike in Excise from 24 % + Rs 15000 to 27 % , Toyota has hiked price of Fortuner by around Rs 1 lac - how is this justified with the small increase in budget and they have changed the prices in Jan 2012 only

Its ridiculous that people who spend 10 or 20 or 40 lacs on a car talk of being the "common" man who wants to save money by not paying their FAIR SHARE of tax on the energy they consume.

I am opposed to the excise tax increase. I am opposed to the import duty increase. I can even argue against heavy taxes of fuel. I am generally oppose to taxation in India because the government spends tax revenue in extremely wasteful and corrupt ways.

But none the less, I will not support petrol and diesel priced differentially, which has the effect of causing some people to carry all the burden of fuel taxation revenue (not just car owners but also the millions of two wheeler owners).

I am also seriously concerned about urban smog caused by the explosion of diesel vehicles, even if the "common" man isn't.

I am also seriously concerned about urban smog caused by the explosion of diesel vehicles, even if the "common" man isn't.

So removing diesel cars from the scene will automatically make all the commercial vehicles on the road pollution free? Interesting. From what I can see, the worst offendors as far as smog is concerned are the fleets of old trucks on our highways and city roads.
They are the bigger problem. Infact, the measured pollution levels around major roads in Delhi at night(when trucks are allowed in) are actually as much as peak traffic hours, when traffic volumes are 10x.

Can some one knowledgeable explain how the rupee divides among cost, various duties, and taxes of a 10 lakh OTR car?! (Say registration is at 8%). Thanx in advance. I've read in several places that the actual portion of taxes, and the so called govt subsidies, on the price of petrol/diesel is still a closely guarded secret, inspite of several RTI petitions.

I see no reason for diesel to be subsidized for passenger car owners or cab operators. Every car owner/operator should be taxed the same.

I eagerly await the day when diesel cars will be taxed so high as to completely negate the savings made on the diesel fuel.

That does smell of prejudice , cool down ! Seems you own a petrol car and are frustrated at the petrol prices , is it ? Diesel is not subsidized - by subsidization I mean selling at loss. I won't use Europe prices as they are heavily taxed, but US pricing of diesel and petrol is both in mid 40s per litre, and the US too has some tax component. This means what we pay in India for diesel is close to free market price of diesel ( cost + margin ). If the government taxes Rs 20 on diesel that would be sold at Rs 38 as free market price , collecting Rs 20 tax from OMCs , but then instructs the OMCs to sell at Rs 48 and absorb the difference, is it really a subsidy ?

Private diesel vehicles are not new, but until recently they were jeeps and tractors, matadors and such commercial vehicles. They were joined by Tata Sumos and Traxes which operated as taxis. Diesel cars are even newer. Even accounting for the numbers, they are not the major consumers of diesel because private vehicles which aren't used as cabs/taxis, cover much less mileage than commercial vehicles. Private cars sit in the home or office parking most of the day. Commercial vehicles spend far more time and thus diesel on the road. The SIAM figure was 0.6% of all diesel consumption for small private vehicles such as cars and SUVs, not vehicular diesel consumption, but this includes a significant amount of the farmers' jeeps , taxis, call center cabs used commercially.

So if your annoyance is at differential taxation, the right way is to attack it by demanding reduction of taxes on petrol, not increasing taxation for someone else. Moreover, diesel engines and diesel fuel are more fuel efficient , why artifically tax efficiency to promote lesser efficiency ? Let petrol fall out of favor due to technical merit , if future petrol motors manage to match diesel efficiency and sold at fair prices devoid of artificially raised prices, petrol may well gain preference over diesel.

Remember when we say diesel consumption, it is not just vehicles, but also includes diesel used in industries, DGs, Railways etc.

BTW, I agree with you that both fuels should be taxed similarly and should not subsidized. But I also feel that tax on diesel vehicles is a stupid solution.

Thank you, but unfortunately my fundamental point remains unanswered. The question is not what percentage of diesel consumption is in passenger vehicles (though I did ask that), but what the consumption of diesel is relative to petrol and how much loss of revenue to the public treasury does that represent that is being borne by petrol users.

I have ZERO sympathy for people wanting to not pay tax on diesel when millions and millions of people pay tax on petrol.

As to whether taxing diesel vehicles is stupid, no, I don't think so because diesel is subsidized primarily for agriculture and farmers have to buy their diesel on the open market. If diesel is availabe in the open market, you cannot stop passenger car owners/operators from procuring it. The easiest solution is to tax diesel cars.

But if you have a better solution for ensuring that the public treasury collects the revenue that the diesel vehicle's owner/operator would have paid had the vehicle been powered by petrol, I am all ears.

Lastly, in response of TSK, firstly, in cities like delhi where public transport is on CNG, and the number of diesel cars HUGELY outnumbers the number of trucks, your defense does not fly. Furthermore, the polllution caused by commercial vehicles is no excuse to overlook pollution caused by cars.

We indians are so devoid of hope that the right thing will be done and also so reluctant to do the right thing ourselves that we don't care about what the right thing is and how to move the country towards doing the right thing collectively. We just want to preserve whatever opportunities and privileges we do have.

Instead of demanding that farm equipment and trucks be made to meet emissions standards and that all diesel powered vehicles be made to meet stiff emissions standards on soot and other smog causing emissions, we just make excuses about how diesel cars are cleaner than the other diesel polluters. As long as the argument is in support of keeping diesel and diesel cars cheap, why not!!

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Originally Posted by Ricci

That does smell of prejudice , cool down ! Seems you own a petrol car and are frustrated at the petrol prices , is it ?

do you feel good that users of diesel escape paying taxes that petrol users pay, taxes that go towards roads and bridges and highways?

do you feel good that users of diesel escape paying taxes that petrol users pay, taxes that go towards roads and bridges and highways?

But going by the same logic then how do you justify the different taxation slabs? Why should the amount of tax be any different for different incomes. Doesn't that mean that the govt is just punishing the hard working person for earning more?

Similarly a lot is wrong with our country. For instance the Govt cannot even increase the ticket price by a small amount since a decade now even though the Railways shows losses. What about all that lost revenue? Petrol has always been a money making commodity as far as govt is concerned. They make mistakes in a million other places by giving ineffective subsidies and schemes, millions are pilfered in the disguise of these schemes and in the end they recover all this lost amount from taxing Petrol to an insane level. How does increasing taxes on Diesel going to lessen your fuel bills? Can 2 wrongs make 1 right? I had come across a post by a member sometime back on this issue and found it very amusing: "We Indians are strange. Instead of trying to correct the wrong, we are more interested in making sure that the other people also suffer. As long as thats happening everything is good". This is exactly what I see here. Increasing diesel prices is not going to help. At the end of the day the govt needs to do away with all sort of subsidies. They cant keep this fiasco go on for ever. Increasing taxes on diesel is just a short term solution.

@Dr Mohit :
"We Indians are strange. Instead of trying to correct the wrong, we are more interested in making sure that the other people also suffer."

Exactly, it's the thinking, if I can't enjoy x , others must be deprive of x too. There is a lot of unfairness in the world, but taxing everything will make us all poorer.

@Harbir :
Again you are missing the point. This is not tax evasion, because diesel car owners are not refusing to pay what they must, it's the government creating the mess of differential pricing through taxation. Also - why should anyone pay unfair taxes which will be misappropriated for more grandiose failed schemes. What burns you is higher taxes on petrol, that does not get solved by taxing diesel higher. It's like saying someone stole my money, so everyone else should be robbed too.

given the state of accountability that big governments imply, no one really knows for sure where the tax money is disappearing. For building roads and bridges - that's what road tax is collected for. Why tax the fuel itself , fuel is not used exclusively by road vehicles, it is also used in diesel generators for power backup, for companies, mobile towers, ships , railway locomotives - bit unfair to tax them for build roads, no ?

Raising taxes to fit some agenda or make up some misspent funds - oldest trick in the book. Let's not encourage it, we all lose in the process , Going OT : governments are usually inefficient, bigger governments are even more inefficient. Taxes are used to hide/smudge this inefficiency.
Ours is a welfare government, they look after their welfare very well. There are some others who share your thoughts, that diesel is subsidized ( it is not ), and that the rich are opportunistically misusing the subsidy meant for the poor. But if the logic is that diesel is for the poor, how many poor people have trucks/cars/diesel power generators ? Most of the time they are operators ( truck drivers, bus drivers , taxi drivers ), not owners. How do they benefit personally from subsidized diesel, they are paid a salary or commission anyway ?
As for government owned bodies like railways, public transport - they don't fill from gas bunks, they have their own internal supply chain, they can always get cheaper/subsidized diesel. If this is indeed subsidized diesel, the operating costs of railways and city bus will be cheaper for the users, but if this should be done by taxing others , what other burdens should the middle class and higher classes bear ? That can become an endless pass on the living costs one-way train, mainly borne by middle class because the rich own businesses and they will increase their prices , passing on the burden to their clients.

Another point made is to discourage private vehicles altogether in favour of public transport, and high taxation as the means to enforce this. Sure, I'll use public transport if it is reliable, timely, clean , comprehensively covering all routes and comfortable ; but until that happens, what do we do ? And yes, if they government wants us all to forego private vehicles, every minister , governor , MP , MLA , corporator , every bureaucrat , every commissioner , every government officer too must use only public transport , not their tax funded fleet of vehicles.
Otherwise this becomes nothing but an oligarchy - the government people live in luxury, and reprimand us commoners for small comforts.

Not to mention that diesel vehicles are producing huge particulate emissions compared to petrols because of the weakness of Bharat Standards on that front and thus causing soot and smog in India that has reversed the clean air that had been created by the removal of two strokes and the induction of CNG public transport.

I think you missed the fact that modern Common Rail Diesel engines produce much lesser greenhouse gases than a similarly spec'ed Petrol!

Not to mention their better torque figures, and a much better FE figure.

All that smog and soot is caused by decade old Railway engines and Public Transport buses that see no maintenance what-so-ever.

If you are so freaking environmental friendly, I think you should concentrate on getting those Autoricks which cause Air+Noise pollution and public transport (Corporation buses that pollute the air, I live in Chennai for now and I see only a handful of the lot are BS3 compliant buses, rest all are 'soot on you face' types) out of our roads first.

To be very true, its the Auto companies who are making hay. Auto manufacturers are themselves charging huge premiums from Diesel car buyers. e.g. a diesel variant of an equivalent petrol car is priced ~ 1L more. All the profit is going into Auto companies pocket.

Govt. has borrowed the idea of increasing duties on diesel private vehicles from the Auto companies themselves. Further I see no reason why Diesel supplied to private vehicle owners should be subsidized substantially. For Agricultural & Transport sector, its understandable but no rational when it comes to private vehicles.

To add more, taxes/duties on expensive/luxury Private vehicles should be increased multi-fold but the budget end which is commute oriented should be spared.

Huge incentives should be offered on vehicles running on alternate fuels, elec, etc. At the same time a tab on ex-showroom prices should be kept so that Auto companies do not negate the subsidy effect. i.e. incentives given should percolate down to the end consumer.

Govt. has borrowed the idea of increasing duties on diesel private vehicles from the Auto companies themselves. Further I see no reason why Diesel supplied to private vehicle owners should be subsidized substantially. For Agricultural & Transport sector, its understandable but no rational when it comes to private vehicles.

Thats a very valid thought. Infact I believe if the Govt decides to increase the excise amount on diesel cars then some auto makers may be forced to slash there own price a little and in the end the consumer may not have to pay a lot more than what he is paying now. There is no reason why private car owners should get subsidy but the point everyone is trying to make here is that there is indeed no such subsidy. Its just that the taxes are lower. And by lower I don't mean lower then what most taxes are but lower only im comparison to the atrociously high taxes forced on petrol. In the Subsidies have to go just like reservation. None of the two have made any contribution to the upliftment of the poor.

Infact I don't have figures to support my claim but I feel that subsidy on LPG cylinders ( a good % of which is used by middle and rich class) is a much bigger culprit in adding to the losses of the govt.

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Huge incentives should be offered on vehicles running on alternate fuels, elec, etc. At the same time a tab on ex-showroom prices should be kept so that Auto companies do not negate the subsidy effect. i.e. incentives given should percolate down to the end consumer.

The fact that the Govt is not doing anything to promote these alternative fuels is good enough to prove that the govt gives 2 hoot for the environment. Its only about surviving for them. If keeping diesel prices low means more votes then the prices will stay low.

At the end of the day, the budget is just an media circus which really doesn't affect people most of the time. All FMs believe in the time tested principle of - You give some, you take some!

When it comes to cars, increase in excise duty by a couple of percentage points really doesn't affect purchasing decisions that much thanks to the magic of EMIs. If a customer wants a car from a particular segment, he'll go for it anyway.